USA Credit balance receivables

[johnm90806]

What is the correct treatment for credit balance receivables over 360 days? I would like to move un-applied receipts to a liability account, then review periodically and move to Other Income. I am being told by our corporate office that this is against state and federal law, but I have never heard this before. We notify the customer that they have overpaid, or that we can apply it against current invoices, but the customers do not acknowledge. The amounts are significant.

Thanks,
JM

 

[kirby]

State officials take a dim view of taking other people's money and calling it your income. Terms like "theft" get used at times like that. So, to avoid all that drama, you need to read up on your state's escheatment laws. After a certain period of time you are required to send these funds to the state. Of course, there are penalties for non-compliance....

 

[Nadejda]

How about to send a check with overpaid amount to that customer? For example, dentist company usually send a check with overpaid amount.

 

[Samir]

What is the correct treatment for credit balance receivables over 360 days? I would like to move un-applied receipts to a liability account, then review periodically and move to Other Income. I am being told by our corporate office that this is against state and federal law, but I have never heard this before. We notify the customer that they have overpaid, or that we can apply it against current invoices, but the customers do not acknowledge. The amounts are significant.

Thanks,
JM

This is exactly how I would handle this, except I would find out what the law states on overpayments. You may have to cut back the 360 days to something like 90 days.

 

[Counterofbeans]

State officials take a dim view of taking other people's money and calling it your income. Terms like "theft" get used at times like that. So, to avoid all that drama, you need to read up on your state's escheatment laws. After a certain period of time you are required to send these funds to the state. Of course, there are penalties for non-compliance....

Kirby nailed it.

The correct accounting treatment is to Dr. Receivables and Cr. some liability account. Ultimately, you'll remit these to the state. Taking these to income is often a risky endeavour; proceed at your own risk. State auditors often review accounts like, "Misc Income" for exactly these types of items...